Question

As mentioned in Exhibit P-1 of our textbook, managerial accounting helps managers perform three vital activities - planning, controlling, and decision making. Write a brief 2-3 page paper about your employer or a favorite business you personally visit or are a patron (Starbucks, Netflix, Planet Fitness, etc.) and discuss the risks they face in their industry that can influence their planning, controlling, and decision-making activities.

Include specific examples of threats for all three areas and make suggestions for how they can reduce those risks. Use a SWOT analysis approach to your answer (strengths, weaknesses, opportunities, and threats). Are their risks internal, external, or a combination of both? Also include in your paper why you chose this company and evaluate how successful you think they will be, given their current strategic design, to be prepared for such risks. Provide quantitative and qualitative factors to support your opinion.

EXHIBIT P-1 Comparison of Financial and Managerial Accounting Accounting Recording Estimating Organizing Summarizing Financial and Operational Data Financial Accounting Managerial Accounting Reports to those outside the organization: Reports to managers inside the organization for: Owners Planning Controlling Decision making Creditors Tax authorities Regulators Emphasizes financial consequences of past activities. Emphasizes decisions affecting the future Emphasizes objectivity and verlfiability Emphasizes relevance Emphasizes precision Emphasizes timeliness Emphasizes companywide reports Emphasizes segment reports Need not follow GAAP/IFRS. Not mandatory Must follow GAAP/IFRS. Mandatory for external reports

Answer 1

NETFLIX

Netflix's initial business model included DVD sales and rental by mail, but Hastings jettisoned the sales about a year after the company's founding to focus on the DVD rental business. Netflix expanded its business in 2007 with the introduction of streaming media while retaining the DVD and Blu-ray rental service. The company expanded internationally in 2010 with streaming available in Canada, followed by Latin America and the Caribbean. Netflix entered the content-production industry in 2012, debuting its first series Lilyhammer.Netflix, Inc. is an American media-services provider headquartered in Los Gatos, California, founded in 1997 by Reed Hastings and Marc Randolph in Scotts Valley, California. The company's primary business is its subscription-based streaming OTT service which offers online streaming of a library of films and television programs, including those produced in-house. As of January 2019, Netflix had over 139 million paid subscriptions worldwide, including 58.49 million in the United States, and over 148 million subscriptions total including free trials. It is available almost worldwide except in mainland China, Syria, North Korea, and Crimea. The company also has offices in the Netherlands, Brazil, India, Japan, and South Korea.

Netflix has greatly expanded the production and distribution of both film and television series since 2012, and offers a variety of "Netflix Original" content through its online library. By January 2016, Netflix services operated in more than 190 countries.Netflix released an estimated 126 original series and films in 2016, more than any other network or cable channel. Their efforts to produce new content, secure the rights for additional content, and diversity through 190 countries have resulted in the company racking up billions in debt: $21.9 billion as of September 2017, up from $16.8 billion from the previous year. $6.5 billion of this is long-term debt, while the remaining is in long-term obligations.In October 2018, Netflix announced it would raise another $2B in debt to help fund new content.

Profiles

In June 2008, Netflix announced plans to eliminate its online subscriber profile feature. Profiles allow one subscriber account to contain multiple users (for example, a couple, two roommates, or parent and child) with separate DVD queues, ratings, recommendations, friend lists, reviews, and intra-site communications for each. Netflix contended that elimination of profiles would improve the customer experience. However, likely as a result of negative reviews and reaction by Netflix users, Netflix reversed its decision to remove profiles 11 days after the announcement.In announcing the reinstatement of profiles, Netflix defended its original decision, stating, "Because of an ongoing desire to make our website easier to use, we believed taking a feature away that is only used by a very small minority would help us improve the site for everyone," then explained its reversal: "Listening to our members, we realized that users of this feature often describe it as an essential part of their Netflix experience. Simplicity is only one virtue and it can certainly be outweighed by utility.

Subsidiaries

• DVD.com – A Netflix company that allows members to rent their favorite movies and shows.
• Millarworld – A comic book company that was founded in 2004 by Scottish comic book writer Mark Millar as a creator-owned line.
• Netflix Pte. Ltd. – Netflix's studio in Singapore.
• Netflix Services UK Limited – A British division that holds Private limited with Share Capital.
• Netflix Streaming Services International B.V. – A Netflix subsidiary in the Netherlands.
• Netflix Streaming Services, Inc. – A subsidiary that license and streams all of Netflix's films and shows.
• Netflix Global, LLC – A Foreign Limited-Liability Company filed on August 3, 2016 that co-produces all foreign programming and films
• Netflix Studios – A film and television studio that co-produces any original or foreign content.
• Netflix Services Germany GmbH – A studio that's contribute to German film subsidies supporting domestic movie and TV production in the country.
• NetflixCS, Inc. – Another located 1108 E SOUTH UNION AVE Midvale, UT 84047 (Mid-Atlantic U.S.).
• Netflix Luxembourg S.a r.l. – A subsidiary located in Luxembourg, Europe

Risk Factors

If any of the following risks actually occur, our business, financial condition and results of operations could be harmed.

In that case, the trading price

of our common stock could decline, and you could lose all or part of your investment.

Changes in competitive offerings for entertainment video, including the potential rapid adoption of piracy-based video offerings, could adversely

impact our business.

The market for entertainment video is intensely competitive and subject to rapid change.

Through new and existing distribution channels, consumers

have increasing options to access entertainment video.

The various economic models underlying these channels include subscription, transactional, ad-

supported and piracy-based models.

All of these have the potential to capture meaningful segments of the entertainment video market.

Piracy, in particular,

threatens to damage our business, as its fundamental proposition to consumers is so compelling and difficult to compete against: virtually all content for free.

Furthermore, in light of the compelling consumer proposition, piracy services are subject to rapid global growth. Traditional providers of entertainment

video, including broadcasters and cable network operators, as well as internet based e-commerce or entertainment video providers are increasing their

internet-based video offerings.

Several of these competitors have long operating histories, large customer bases, strong brand recognition and significant

financial, marketing and other resources.

They may secure better terms from suppliers, adopt more aggressive pricing and devote more resources to product

development, technology, infrastructure, content acquisitions and marketing.

New entrants may enter the market or existing providers may adjust their

services with unique offerings or approaches to providing entertainment videos.

The long-term and fixed cost nature of our content commitments may limit our operating flexibility and could adversely affect our liquidity and results

of operations.

In connection with licensing streaming content, we typically enter into multi-year commitments with studios and other content providers. We also enter

into multi-year commitments for content that we produce, either directly or through third parties, including elements associated with these production such as

non-cancelable commitments under talent agreements. The payment terms of these agreements are not tied to member usage or the size of our membership

base (“fixed cost”) but may be determined by costs of production or tied to such factors as titles licensed and/or theatrical exhibition receipts. Such

commitments, to the extent estimable under accounting standards, are included in the Contractual Obligations section of Part II

If we are not able to manage change and growth, our business could be adversely affected.

We are expanding our operations internationally, scaling our streaming service to effectively and reliably handle anticipated growth in both members

and features related to our service, ramping up our ability to produce original content, as well as continuing to operate our DVD service within the U.S.

As our

international offering evolves, we are managing and adjusting our business to address varied content offerings, consumer customs and practices, in particular

those dealing with e-commerce and internet video, as well as differing legal and regulatory environments.

As we scale our streaming service, we are

developing technology and utilizing third-party “cloud” computing services.

As we ramp up our original content production, we are building out expertise

in a number of disciplines, including creative, marketing, legal, finance, licensing, merchandising and other resources related to the development and

physical production of content.

If we are not able to manage the growing complexity of our business, including improving, refining or revising our systems

and operational practices related to our streaming operations and original content, our business may be adversely affected

hanges in how we market our service could adversely affect our marketing expenses and membership levels may be adversely affected.

We utilize a broad mix of marketing and public relations programs, including social media sites, to promote our service to potential new members.

We

may limit or discontinue use or support of certain marketing sources or activities if advertising rates increase or if we become concerned that members or

potential members deem certain marketing practices intrusive or damaging to our brand.

If the available marketing channels are curtailed, our ability to

attract new members may be adversely affected.

Companies that promote our service may decide that we negatively impact their business or may make business decisions that in turn negatively

impact us.

For example, if they decide that they want to compete more directly with us, enter a similar business or exclusively support our competitors, we

may no longer have access to their marketing channels.

We also acquire a number of members who rejoin our service having previously cancelled their

membership.

If we are unable to maintain or replace our sources of members with similarly effective sources, or if the cost of our existing sources increases,

our member levels and marketing expenses may be adversely affected.

SWOT

SWOT stands for: Strength, Weakness, Opportunity, Threat. A SWOT analysis guides you to identify your organization’s strengths and weaknesses (S-W), as well as broader opportunities and threats (O-T). Developing a fuller awareness of the situation helps with both strategic planning and decision-making.

The SWOT method was originally developed for business and industry, but it is equally useful in the work of community health and development, education, and even for personal growth.

SWOT is not the only assessment technique you can use. Compare it with other assessment tools in the Community Tool Box to determine if this is the right approach for your situation. The strengths of this method are its simplicity and application to a variety of levels of operation.

A SWOT analysis can offer helpful perspectives at any stage of an effort. You might use it to:

• Explore possibilities for new efforts or solutions to problems.
• Make decisions about the best path for your initiative. Identifying your opportunities for success in context of threats to success can clarify directions and choices.
• Determine where change is possible. If you are at a juncture or turning point, an inventory of your strengths and weaknesses can reveal priorities as well as possibilities.
• Adjust and refine plans mid-course. A new opportunity might open wider avenues, while a new threat could close a path that once existed.

SWOT also offers a simple way of communicating about your initiative or program and an excellent way to organize information you've gathered from studies or surveys.

A SWOT analysis focuses on Strengths, Weaknesses, Opportunities, and Threats.

Remember that the purpose of performing a SWOT is to reveal positive forces that work together and potential problems that need to be recognized and possibly addressed.

We will discuss the process of creating the analysis below, but first here are a few sample layouts for your SWOT analysis.

Internal factors include your resources and experiences. General areas to consider:

• Human resources - staff, volunteers, board members, target population
• Physical resources - your location, building, equipment
• Financial - grants, funding agencies, other sources of income
• Activities and processes - programs you run, systems you employ
• Past experiences - building blocks for learning and success, your reputation in the community

Don't be too modest when listing your strengths. If you're having difficulty naming them, start by simply listing your characteristics (e.g.., we're small, we're connected to the neighborhood). Some of these will probably be strengths.

Although the strengths and weakness of your organization are your internal qualities, don't overlook the perspective of people outside your group. Identify strengths and weaknesses from both your own point of view and that of others, including those you serve or deal with. Do others see problems--or assets--that you don't?

How do you get information about how outsiders perceive your strengths and weaknesses? You may know already if you've listened to those you serve. If not, this might be the time to gather that type of information. See related sections for ideas on conducting focus groups, user surveys, and listening sessions.

LISTING EXTERNAL FACTORS: OPPORTUNITIES AND THREATS (O, T)

Cast a wide net for the external part of the assessment. No organization, group, program, or neighborhood is immune to outside events and forces. Consider your connectedness, for better and worse, as you compile this part of your SWOT list.

Forces and facts that your group does not control include:

• Future trends in your field or the culture
• The economy - local, national, or international
• Funding sources - foundations, donors, legislatures
• Demographics - changes in the age, race, gender, culture of those you serve or in your area
• The physical environment (Is your building in a growing part of town? Is the bus company cutting routes?)
• Legislation (Do new federal requirements make your job harder...or easier?)
• Local, national or international events

• Steps for conducting a SWOT analysis:

• Designate a leader or group facilitator who has good listening and group process skills, and who can keep things moving and on track.
• Designate a recorder to back up the leader if your group is large. Use newsprint on a flip chart or a large board to record the analysis and discussion points. You can record later in a more polished fashion to share with stakeholders and to update.
• Introduce the SWOT method and its purpose in your organization. This can be as simple as asking, "Where are we, where can we go?" If you have time, you could run through a quick example based on a shared experience or well-known public issue.
• Depending on the nature of your group and the time available, let all participants introduce themselves. Then divide your stakeholders into smaller groups. If your retreat or meeting draws several groups of stakeholders together, make sure you mix the small groups to get a range of perspectives, and give them a chance to introduce themselves.
  • The size of these depends on the size of your entire group – breakout groups can range from three to ten. If the size gets much larger, some members may not participate.
• Have each group designate a recorder, and provide each with newsprint or dry -erase board. Direct them to create a SWOT analysis in the format you choose-a chart, columns, a matrix, or even a page for each quality.
  • Give the groups 20-30 minutes to brainstorm and fill out their own strengths, weakness, opportunities and threats chart for your program, initiative or effort. Encourage them not to rule out any ideas at this stage, or the next.
  • Remind groups that the way to have a good idea is to have lots of ideas. Refinement can come later. In this way, the SWOT analysis also supports valuable discussion within your group or organization as you honestly assess.
  • It helps to generate lots of comments about your organization and your program, and even to put them in multiple categories if that provokes thought.
  • Once a list has been generated, it helps to refine it to the best 10 or fewer points so that the analysis can be truly helpful.
• Reconvene the group at the agreed-upon time to share results. Gather information from the groups, recording on the flip-chart or board. Collect and organize the differing groups' ideas and perceptions.
  • Proceed in S-W-O-T order, recording strengths first, weaknesses second, etc.
  • Or you can begin by calling for the top priorities in each category -the strongest strength, most dangerous weakness, biggest opportunity, worst threat--and continue to work across each category.
  • Ask one group at a time to report ("Group A, what do you see as strengths?") You can vary which group begins the report so a certain group isn't always left "bringing up the end" and repeating points made by others. ("Group B, let's start with you for weaknesses.")
  • Or, you can open the floor to all groups ("What strengths have you noted?") for each category until all have contributed what they think is needed.
• Discuss and record the results. Depending on your time frame and purpose:
  • Come to some consensus about the most important items in each category
  • Relate the analysis to your vision, mission, and goals
  • Translate the analysis to action plans and strategies
• If appropriate, prepare a written summary of the SWOT analysis to share with participants for continued use in planning and implementation.

• HOW DO YOU USE YOUR SWOT ANALYSIS?

  Better understanding the factors affecting your initiative put you in a better position for action. This understanding helps as you:

• Identify the issues or problems you intend to change
• Set or reaffirm goals
• Create an action plan

• As you consider your analysis, be open to the possibilities that exist within a weakness or threat. Likewise, recognize that an opportunity can become a threat if everyone else sees the opportunity and plans to take advantage of it as well, thereby increasing your competition.

  Finally, during your assessment and planning, you might keep an image in mind to help you make the most of a SWOT analysis: Look for a "stretch," not just a "fit." As Radha Balamuralikrishna and John C. Dugger of Iowa State University point out, SWOT usually reflects your current position or situation. Therefore one drawback is that it might not encourage openness to new possibilities. You can use SWOT to justify a course that has already been decided upon, but if your goal is to grow or improve, you will want to keep this in mind.